(CNN) -- Dave Pries stands near a decades-old weather siren in his hometown of Minneiska, Minnesota, worrying about when the next tornado will hit. Along with the weather, the city clerk voices another big concern here: slow Internet connections.

"It's about as slow as sending it through the post office," he says. Minneiska, like many rural communities, cannot afford to install the infrastructure for broadband. Pries says not having it is more than just an inconvenience. He says if the town had it, it would be able to send weather alerts directly to people's homes. Without it, he says, the town relies on an aging siren in need of an upgrade.

"This equipment that we have here is dated back to the 1970s, 1980s, maybe early 1980s." He adds, "It's going to become obsolete at the end of the year."

Enter Gary Evans, the CEO of Hiawatha Broadband. Minneiska is among the communities Evans serves.

"That's really what broadband means to rural America," Evans says. "It means survival." When the government announced it was tapping $7.2 billion in stimulus money to bring broadband to rural communities, Evans thought he had a good case. His customers include the Prairie Island Indian Community.

In Lake City, Minnesota, apple orchard owner Dennis Courtier warns of small businesses like his becoming extinct. "Not having the kind of communication capacity in rural areas for rural businesses, it's going to be like not having electricity at the end of the Depression."

Evans applied for nearly $6 million in broadband grants and gets emotional when talking about what happened next. "Unfortunately, the application above was not selected for funding," says his rejection letter from the Department of Commerce. The letter says his application didn't score high enough to move forward.

The Commerce Department says, "We can't fund all the proposals we receive, nor do we have the resources to debrief every applicant."

A second agency, the Department of Agriculture, rejected Evans' application because the company didn't put up enough of its own money. Jonathan Adelstein, the administrator of the U.S. Department of Agriculture's Rural Utilities Service, says the government required companies to fund half the project. Hiawatha planned to put up 20 percent.

Evans says his rejection stung even more when he learned one of the projects the Department of Agriculture did fund was Bretton Woods Telephone Company in the ski resort community of Bretton Woods, New Hampshire. It won nearly $1 million in broadband grant money at the urging of real estate developer Charles Adams.

"You know, we felt like it was a little bit of a needle in a haystack," Adams says. "We definitely thought it was a little bit of a long shot."

Adams is planning to build 900 vacation homes around the resort, a plan on hold because of the economy. Four-hundred vacation homes exist and about 40 of them house year-round residents. Adams says he is pushing for broadband, saying it's key to the community "not only for people who want to live there and, you know, telecommute, but also in attracting businesses who want to set up operation in a place like this."

Geoff Daily, broadband blogger at app-rising.com, is critical of the government's decision to award Bretton Woods money and reject Hiawatha. He's been tracking the broadband money.

"If this is really about connecting the unconnected, I think of that as more of an immediate thing, like: Who needs it for their day to day lives? Who needs it for their health care and their education and to find a job and do these kinds of things? Not as a 'nice to have' amenity to encourage tourism in a ski chalet village," says Daily.

The Department of Agriculture's Jonathan Adelstein defends the move, pointing out that in Bretton Woods, tourism is the lifeblood of the economy.

"It's not a question of which one's more worthy. Both of them may be very worthy. Only one of the applications in this case was submitted to us properly in a way that was eligible," Adelstein says.

Adelstein says he hopes Hiawatha will apply again. "That part of the country urgently needs broadband. I think it's a very legitimate concern that there be better broadband in the service territory."

The government is changing its rules and that could help Hiawatha in a second round of funding. Of the 2,200 applicants who applied for government money, about 168 were approved, leaving more than $5 billion to be distributed. Adelstein says Hiawatha was not alone in not being able to put up enough money.

"I think we learned from round one that we need to be a little more flexible in how we look at these applications," says Adelstein. The new rules will mean the government will pay for as much as 75 percent of projects. In some cases, the government will pay 100 percent if loans, not grants, are involved.

That may help companies like Hiawatha, but it's also an acknowledgement that the administration's "meet-us-halfway" rule was too much of a burden in tough economic times.